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Foreign Waste Disguised as Aid

The closer his term comes to an end, the more leftward President
Clinton seems to move. In a speech before the Veterans of Foreign
Wars, he urged Congress to approve his bloated foreign aid budget.
Yet no one would benefit from throwing more money at programs which
have consistently failed.

Foreign assistance has always had strong defenders. They
believed fistfuls of cash could buy political stability, spur
social progress and eliminate poverty in the Third World.

Alas, this strategy, backed by more than $1 trillion (adjusted
for inflation) from the United States alone, has crashed and
burned. In 1996, the UN declared that 70 countries, aid recipients
all, were poorer than in 1980. An incredible 43 were worse off than
in 1970. Chaos, slaughter, poverty and ruin stalked Third World
states, irrespective of how much foreign assistance they
received.

But aid advocates haven’t given up. Mr. Clinton told the VFW
that current programs are “designed to keep our soldiers out of war
in the first place.” Without money for the Balkans, he warned:
“Make no mistake - there will be another bloody war.” It’s a
superficially appealing argument. Alas, it simply isn’t true.

In no case did peace result. To the contrary, aid often fostered
conflict, underwriting autocratic, venal dictators who impoverished
their nations.

Then there’s Bosnia. President Clinton’s speech was reported on
the same day that the New York Times reported the results of an
exhaustive international investigation of the $5.1 billion in aid
provided to that nation since 1995.

This money, too, was intended to prevent the resumption of
conflict. Alas, reports Chris Hedges: “As much as a billion dollars
has disappeared from public funds or been stolen from international
aid projects through fraud.”

Western officials fear even discussing the problem lest it
frighten away “international donors.” As well it should. For
instance, in 1999 $200 million has simply disappeared from the city
of Tuzla’s budget, on top of $300 million missing over the past two
years. Aid agencies and foreign embassies lost $20 million
deposited in one Bosnian bank.

The U.S. Agency for International Development established a $278
million revolving fund to jump-start local businesses.
Hidrogradnja, one of Bosnia’s largest firms, failed to repay $1
million in loans. The agency has sued 19 companies that failed to
repay more than $10 million worth of loans.

The investigation was conducted by the anti-fraud unit of the
Office of the High Representative - essentially the West’s dictator
in Bosnia. Officials have reportedly compiled a 4,000-page report
and are investigating 220 cases of alleged corruption and
fraud.

Not surprisingly, the recipients of aid seem uninterested in
prosecuting wrongdoers. The High Representative has formally barred
15 miscreants from office, but most, reports the Times, retain
their influence. Bosnian President Alija Izetbegovic dismisses the
High Representative’s allegations.

Of course, President Izetbegovic’s son, Bakir, is reputed to be
one of the richest men in Bosnia. Bakir Izetbegovic controls
Sarajevo’s City Development Institute, which determines who gets to
occupy 80,000 public apartments. Members of the ruling party get
preferential access, while average Bosnians complain they have to
pay a $2,000 kickback.

Western officials report that the younger Mr. Izetbegovic shares
the extortion money extracted by Sarajevo gangsters from local
businessmen. He also owns 15 percent of state-controlled Bosnia
Air.

The problem is not just those who are stealing, but those who
are paying. James Lyon, director of the Crisis Group, complains:
“The international administrators beg, plead, cajole and in some
cases engage in what looks like bribery, promising cities
infrastructure projects if they allow some refugees to return.” It
should surprise no one if what looks like bribery ends up being
treated like bribery.

Alas, the experience of Bosnia is all too common. The venality
of aid recipients such as the Philippines and Zaire was legendary.
A new study from the National Bureau of Economic Research reports
that more corrupt governments tend to receive more aid. Even more
money will only worsen the problem.

President Clinton evinces the best of intentions in lobbying for
his foreign aid bill. But 50 years of experience shows foreign
assistance to be a bust. It should be called foreign waste, not
foreign aid.